Shell To Slash Exploration Workforce by 20%: Reuters

By Charles Kennedy - Aug 29, 2024

• Reuters: Shell plans to reduce its oil and gas exploration and development staff by 20%.
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• The new cuts follow Shell’s earlier moves to reduce its workforce in the renewable and low-carbon segment.
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• Shell’s new CEO, Wael Sawan, is on a cost-saving drive to improve the company’s performance in comparison with its peers.
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Oil supermajor Shell (NYSE:SHEL) is planning to reduce its oil and gas exploration and development staff by 20%, according to an exclusive report from Reuters, citing intentions to cut costs to what has long been a wildly profitable segment of the oil giant’s business. 

The new cuts follow Shell’s earlier moves to reduce its workforce and costs in the renewable and low-carbon segments. 

According to Reuters, citing unnamed company sources, Shell is restructuring its operations, targeting exploration, well development and subsurface units, with its UK and Dutch branches set to carry the heaviest burdens. 

The workforce cuts are not set in stone, and must still be discussed with employee representatives.  

Shell’s new CEO, Wael Sawan, is on a cost-saving drive to improve the company’s performance in comparison with its peers. 

"Shell aims to create more value with less emissions by focusing on performance, discipline and simplification across the business. That includes delivering structural operating cost reductions of $2-3 billion by the end of 2025," Shell said in a statement carried by Reuters. 

On August 1, Shell reported adjusted earnings of $6.3bn for the second quarter, beating analyst consensus. The company initiated a $3.5bn share buyback program, to be completed by the third quarter results.

The previous month, Shell pressed pause on the construction of its Rotterdam biofuels facility and announced it would divest from a Singapore refining plant. Those two movies, plus slower trading in its gas division, resulted in a ~$2-billion impairment. 

Shell’s subsidiary Shell Nederland Raffinaderij announced in July that it would temporarily pause on-site construction work at its 820,000 tons-a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam in the Netherlands “to address project delivery and ensure future competitiveness given current market conditions,” the company said. 

That move saw Shell walk back several of its climate commitments and pledges, which triggered the resignation of several high-profile executives in its renewables division.

By Charles Kennedy for Oilprice.com

 

Can Norway Remain Europe's Top Gas Supplier While Meeting Climate Goals?

By Felicity Bradstock - Aug 29, 2024

• Norway's oil production could start declining as early as 2025 if new exploration activities are not pursued.
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• The Norwegian Offshore Directorate (NOD) has outlined three scenarios for Norway's oil and gas production between 2025 and 2050, all of which show a decline in output.
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• Equinor plans to invest $66 billion in oil and gas by 2035, with the aim of maintaining production at around 1.2 million bpd over the next decade.

Norway has been investing heavily both in its renewable energy infrastructure as well as continuing to produce huge quantities of oil and gas for several years. However, with greater pressure from international organisations to curb oil production, a lack of new exploration activities, and worries of a decrease in global demand for fossil fuels in the coming decades, Norway’s oil production could begin to decline from as early as 2025. Norway’s upstream regulator, the Norwegian Offshore Directorate (NOD), reported this month that it expects the country’s oil and gas production to start decreasing from next year if the government does not pursue new exploration activities to maintain Norway’s output. This could prevent the Nordic country from earning billions in revenue. 

Norway has overtaken Russia as the biggest natural gas supplier for Europe, following the Russian invasion of Ukraine and subsequent sanctions on Russian energy. It has reserves of around 7.1 billion cubic metres of oil equivalent (Bcmoe), including around 3.5 Bcmoe of undiscovered resources, according to the regulator. In its report, the NOD set out three scenarios for Norway’s oil and gas production between 2025 and 2050, which all show a decline in output, and all, according to the regulator, adhere to Paris Agreement objectives. 

In the “base scenario”, oil and gas output increases to 243 million cubic metres of oil equivalent (MMcmoe) in 2025 before gradually falling to 83 MMcmoe in 2050. This would largely be owing to a decline in Norway’s bigger oil fields. The “low scenario” shows production falling, starting in 2025, to almost zero by 2050. This is driven by a lack of exploration activity and the drying up of wells in the Barents Sea. In the “high scenario”, production remains high for the next decade before decreasing to 120 MMcmoe by 2050. This is driven by greater exploration in the coming years and the rollout of advanced technologies in the industry. 

The NOD highlighted that the Norwegian continental shelf is still competitive, as it has vast oil and gas reserves and sufficient infrastructure, as well as favourable government policies. The 2000 petroleum tax reform has also helped spur investment in the sector, supporting growth. Further, Europe’s movement away from a reliance on Russian energy has helped Norway to become the biggest supplier of gas in the region, a trend that is expected to continue for several years, with natural gas seen as a transition fuel for the green transition. However, the regulator emphasised that the failure to capitalise on Norway’s massive oil and gas reserves, as shown in the high scenario, would equate to losing “nearly an entire government pension fund” – or around $1.42 trillion. 

Kjersti Dahle, the Director of Technology, Analysis, and Coexistence at the NOD, stated, “This is why we’ll need to ramp up exploration and investment in fields, discoveries and infrastructure moving forward in order to slow the decline in production. A failure to invest will lead to rapid dismantling of the petroleum industry.” Dahle added, “The scenarios reveal stark differences in future value creation and future government revenues from the petroleum activities. The Norwegian Offshore Directorate’s calculations show a difference in net cash flow of about NOK 15 thousand billion between the high and low scenarios.”

This year, two Norwegian firms brought an end to drilling operations in the Barents Sea. While Aker BP’s project resulted in a gas discovery, Equinor made no such find. Preliminary estimates show that the size of the Aker discovery could be between 0.51 – 0.7 million standard cubic metres (Sm3) of oil equivalent. The NOD is calling for more companies to launch exploration activities in the region, as well as for the development of a new pipeline to support increased gas production in the Barents Sea.

While Equinor may have failed to make a discovery in its recent Barents Sea project, it has big plans for oil and gas in Norway. Equinor's CEO, Anders Opedal, recently stated that it is important for Equinor to maintain economic growth and support Europe’s energy security, while also backing the green transition. Opedal said that high levels of investment in oil and gas will continue for “many, many years”, while also emphasising the importance of the electrification of Equinor’s operations to reduce emissions. 

This month, Equinor announced plans to invest $66 billion in oil and gas by 2035, as well as an emergency preparedness plan for Barents Sea activities, following the recent NOD report. The plan earmarks between $5.7 and $6.6 billion a year for hydrocarbons. The company hopes to maintain production at around 1.2 million bpd over the next decade. Funding will boost exploration activities, with plans to drill between 20 to 30 wells a year to ensure a stable output over the next 10 years. This action from Equinor is expected to help Norway avoid the “low scenario” set out by the NOD, as it continues to produce high levels of oil and gas well into the next decade. 

By Felicity Bradstock for Oilprice.com 

Pipeline Politics Is Forcing (IRAQ) Kurdistan to Sell Oil at a Discount

By Charles Kennedy - Aug 29, 2024

Crude oil production in Iraq’s semi-autonomous region of Kurdistan is currently about 350,000 barrels per day (bpd), but it all goes to local buyers at steep discounts as the key export route via a pipeline to Turkey’s Mediterranean coast continues to be shut in.

Kurdistan’s crude output is now around 50,000 bpd lower compared to production levels before March 2023, when the pipeline to Turkey’s Ceyhan was closed due to an international dispute, according to figures provided to Argus by Myles Caggins, a spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur).

Kurdish oil flows via pipeline to Turkey, of about 450,000 bpd, ceased last year after they were shut in in March 2023 due to a dispute over who should authorize the Kurdish exports.

The impasse followed an International Chamber of Commerce ruling in March 2023 in a dispute between Turkey and Iraq regarding Kurdistan oil. The ICC ruled in favor of Iraq, which had argued that Turkey should not allow Kurdish oil exports via the Iraq-Turkey pipeline and the Turkish port of Ceyhan without approval from the federal government of Iraq.

The companies members of the Apikur association continue to produce oil in the semi-autonomous Iraqi region, but have to sell their crude to local buyers at steep discounts of around $45-$50 per barrel below international crude oil prices, Apikur’s Caggins has estimated.

“The volume of production has generally increased since the shuttering of the pipeline in March 2023. All Apikur members remain focused on ultimately having the pipeline reopened for exports,” the spokesperson told Argus.

Kurdistan hasn’t been able to export its oil via a pipeline for more than a year now, but crude continues to flow out of the semi-autonomous Iraqi region in smuggling operations, on tank trucks to the border with Iran. 

More than 1,000 such tank trucks are estimated to be transporting at least 200,000 bpd of Kurdish oil to Iran and Turkey, a Reuters investigation has found.

By Charles Kennedy for Oilprice.com

Who Is Playing Who In The Great Iraq Carve-Up?

By Simon Watkins - Aug 28, 2024

• Chinese firms won most of Iraq's latest oil contracts, continuing China's dominance in Iraq's oil and gas sector.
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• The U.S. and its allies counter this by securing deals like the $27 billion TotalEnergies project to reduce Iraq's energy dependence on Iran.
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• Surprisingly, China Energy and TotalEnergies are collaborating on a solar project, signaling potential cooperation between China and the West in Iraq.

Recent days have seen two major announcements from Iraq’s oil and gas sector that may only add to the broad-based malaise felt by those who are frequently afflicted with cognitive dissonance when looking at the country. On the one hand, Chinese firms again won most of the 13 contracts for oil fields and exploration blocks awarded by Iraq’s Oil Ministry in the latest bidding round held from the 11^th to the 13^th of May. When fully developed these will add 750,000 barrels per day (bpd) of oil and 850 million cubic feet per day (MMcf/d) of gas to the country’s output. This is in line with China’s ongoing attempts to take control of these Iraqi assets and much of its political and economic future as well, as analysed in depth in my latest book on the new global oil market order. On the other hand, the U.S. and its key allies have sought to stymie this power-grab project by Beijing, principally through the making of other oil and gas deals in the country wherever possible by key firms associated with the West. Most notably of all perhaps, this included the US$27 billion four-pronged deal being run by France’s TotalEnergies. Given these two factors, then, last week’s announcement that the China Energy Engineering Corporation (CEEC) is to work with the French firm on the roll-out of the 1-gigawatt solar power project at the Artawi field in Basra – a key element of TotalEnergies’ megadeal – has come as something of a surprise, to say the least. So, what on earth is going on?

From the Chinese side, many of its top oil and gas companies were among those who won contracts most recently. These included China National Offshore Oil Corporation (CNOOC) for Block 7, ZPEC for the East Baghdad and Middle Furat oil fields (and for the Qurnain and Abu Khaima blocks), Geo-Jade for the Zurbatiya and Jebel Sanam blocks, Sinopec for the Summer block, Anton Oil for Al-Dhifriya oil field, and the Hong Kong-based UEG for the Fao Block. Even before this latest awards extravaganza, more than a third of all Iraq’s proven oil and gas reserves and over two-thirds of its current production were managed by Chinese companies, according to industry figures. This degree of dominance had long been Beijing’s plan, once the U.S. had officially ended its combat mission in the country at the end of 2021, and to that end China’s Zhenhua Oil signed a US$2 billion five–year prepayment oil supply deal with the Federal Government of Iraq (FGI) in Baghdad around that time. This deal precisely mirrored the same type of deal done by Russia in the Kurdistan Region of Iraq (KRI) after the failure of the independence referendum toward the end of 2017, which gave Moscow effective control over all the KRI’s oil and gas assets.

Although the U.S. still had enough clout to lean on Baghdad to stymie the deal, China then moved ahead with expanding the terms of its 2019 ‘Oil for Reconstruction and Investment’ agreement with Iraq into the much broader and deeper 2021 ‘Iraq-China Framework Agreement’, as also detailed in my latest book on the new global oil market order. One element of this was a preference to be given to Chinese firms on all future oil and gas contracts for the sites in which Beijing had an interest, and another element was discounted pricing on Iraqi oil and gas for Beijing. But the 2021 deal went a lot further than oil and gas, allowing China great scope to build out corollary infrastructure across the country. One notable case in point was the awarding in 2021 to China of contracts to build a civilian airport to replace the military base in the capital of the southern oil-rich Dhi Qar governorate. This region includes two of Iraq’s potentially biggest oil fields – Gharraf and Nassiriya – and China said that it intended to complete the airport by 2024. This project would include the construction of multiple cargo buildings and roads linking the airport to the city’s town centre and separately to other key oil areas in southern Iraq. In later discussions connected to the 2021 Agreement, it was decided that the airport could be expanded later to be a dual-use civilian and military airport. The military component would be usable by China without first having to consult with whatever Iraqi government was in power at the time. Even more tendrils have sprouted from this evergreen Agreement for China, in the shape of plans to link Iraq’s US$17 billion Strategic Development Road (SDR) program directly into China’s own ‘Belt and Road Initiative’ (BRI)’. This effectively allows free movement of goods and people from China into Europe across Iraq, and it can link into both Iran’s long-sought ‘Land Bridge’ to the Mediterranean and to the adjunct ‘Russia-Iran Energy Corridor’. 

About the only thing that had not gone Beijing’s way in Iraq since the end of 2021 was the US$27 billion four-layered TotalEnergies’ deal. One of the key projects is the Common Seawater Supply Project (CSSP) that is critical in enabling Iraq to dramatically increase its crude oil production up to 6 million barrels per day (bpd), or 9 million bod, or even 13 million bpd, as also analysed in full in my latest book on the new global oil market order. The project was delayed for over a decade, as the U.S.’s ExxonMobil and the China National Petroleum Corporation (CNPC) battled it out for control until finally the U.S. firm withdrew and CNPC made no substantive progress, allowing TotalEnergies to take the contract. The project involves taking and treating seawater from the Persian Gulf and then transporting it via pipe­lines to oil production facilities to maintain pressure in oil reservoirs to optimise the longevity and output of fields. The initial plan for the CSSP is that it initially supplies around 6 million bpd of water to at least five southern Basra fields and one in Maysan Province and is then expanded for use in other fields.

A second major project is for the French firm to collect and refine associated gas that is currently burned off during oil drilling at the five southern Iraq oilfields of West Qurna 2, Majnoon, Tuba, Luhais, and Artawi. For the West, the key advantage of this would be to reduce Iraq’s long-running dependence on neighbouring Iran for up to 40 percent of its energy supplies through gas and electricity imports. This would be a good start in driving a wedge – albeit a slim one to begin with - between the two countries that could be further exploited to undermine the regional influence of the Shia Crescent of Power. This could then be used to stymie Iran’s ongoing efforts to build its Land Bridge that will then be used by Tehran to increase arms shipments to its militant proxies for use against Israel.

TotalEnergies already has ongoing experience of working across Iraq, holding a 22.5 percent stake in the Halfaya oil field in Missan province in the south and an 18 percent stake in the Sarsang exploration block in the semi-autonomous region of Kurdistan in the north. This gives it very specific operational experience of working on the ground in Iraq, which would also enable it to increase crude oil output from the Artawi oil field, which is the third of the four projects to which it is committed. According to earlier comments from Iraq’s Oil Ministry, TotalEnergies would help to boost output from the Artawi oilfield to 210,000 bpd of crude oil, up from the current circa 85,000 bpd. The last of the four projects that were to have been undertaken by the French company would be the construction and operation of a 1-gigawatt solar energy plant in Iraq.

The engagement of China to help on both the Artawi and solar energy project, then, may mark an extension of a new tactic by the West of cooperation between both sides in Iraq, at least for as long as it is beneficial. It is apposite to note that shortly before this cooperation was announced between the French and Chinese firms, the UK’s BP signed a preliminary agreement to rehabilitate and develop four fields in the hugely oil-rich region of Kirkuk in Iraq’s politically sensitive northern region. “The policy of antagonism between the West and East in Iraq has not benefitted us [the West] there [in  Iraq], so a change in tack is wise at this point,” concluded a senior European Union energy security source exclusively spoken to by OilPrice.com last week.

By Simon Watkins for Oilprice.com

Zambia plans state firm to own 30% of critical minerals mines

Bloomberg News | August 29, 2024 |
KoBold Metals is involved in nearly 60 explorations projects across three continents. (Image courtesy of KoBold Metals.)

Zambia plans to establish an investment company that will control at least 30% of critical minerals production from future mines.


Mines Minister Paul Kabuswe unveiled a strategy on Thursday that he said will allow Zambia to maximize the benefits from its deposits of metals key to the energy transition. Africa’s second-largest copper producer aims to more than quadruple output of the metal by early in the next decade, but it also has deposits of cobalt, graphite and lithium.

The state will set up a special purpose vehicle to invest in critical minerals under a design framework that includes a “production sharing mechanism” setting aside a minimum 30% of the output from new mining projects, according to the document unveiled by Kabuswe in Zambia’s capital, Lusaka.

Miners including Barrick Gold Corp., First Quantum Minerals Ltd. and China Nonferrous Mining Corp. are investing in their Zambian copper projects. Zambia is also counting on the Konkola and Mopani copper mines — under the control of Vedanta Resources Ltd. and Abu Dhabi’s International Resources Holding respectively — to ramp up production.

The government’s goal of producing 3 million tons of copper a year by 2031 requires existing assets to double their output to about 1.4 million tons, according to a separate document prepared by Kabuswe’s ministry. Sites currently in the exploration phase – such as the Bill Gates-backed KoBold Metals’ Mingomba project – are expected to provide an ambitious 1.2 million tons annually.

The government also intends to make investors in the critical minerals sector allocate at least 35% of procurement costs to local suppliers, according to the strategy. It will also review Zambia’s policy and regulatory environment to restrict the export of unprocessed materials.

(By William Clowes)

Iron ore’s ‘irrational’ rally past $100 triggers warning from Chinese media

Bloomberg News | August 29, 2024 

Financial street in Beijing (Stock Image)

Iron ore has jumped by about 10% in 10 days to breach $100 a ton, prompting the official journal of China’s metals industry to pen a long article on why the gains are overdone.


The steelmaking material has powered higher in the face of a barrage of downbeat commentary on prospects for Chinese demand — including from top global iron ore miner BHP Group Ltd. The advance is piling pressure on China’s struggling steelmakers, according to state-affiliated China Metallurgical News.

“The current rise in iron ore prices lacks fundamental support,” according to the journal’s column on Wednesday, which called the spike “irrational.” Plentiful supply, weak demand, high inventories, and low mining costs should continue to weigh on the commodity in the rest of 2024, it said.

China’s steel sector is battling what its top producer China Baowu Steel Group Corp. claimed were worse conditions than earlier crises in 2008 or 2015. Iron ore prices are still down by more than a quarter this year — as construction activity contracts — but a slight tick-up in steel prices in recent weeks has encouraged gains for the raw material.

Industry and government officials in China often issue warnings about over-exuberance in the volatile iron ore market, especially when prices post rapid rallies or notch new highs. Steelmakers across the world’s top-producing nation are struggling to make money as slowing demand spurs fierce competition.

An executive at Baowu’s listed unit echoed the complaints about the squeeze on the industry. Big miners are making outsized profits and the Chinese steel industry is planning output cuts, Zou Jixin, chairman of Baoshan Iron & Steel Co., said on a call with investors, after the company reported flat first-half profits.

“We should pass on industry pressure to the upstream sector,” said Zou. “With mills cutting output, that will surely reduce demand for iron ore.”
Cost support

On Tuesday, BHP said a major transition was underway in China’s steel industry as decades of property-intensive growth come to an end. Still, other sectors including transportation, infrastructure and shipbuilding — as well as overseas sales — are taking up some of the slack. BHP’s underlying earnings from iron ore in the year through June rose 13%.

The Australian mining behemoth said iron ore has support in a band between $80 and $100 a ton, a level at which many high-cost producers in China, India and other areas will have to consider halting output.

“Iron ore is prone to rise but resistant to declines — repeatedly devouring industry profits — and this year the situation is even worse,” the China Metallurgical News said in its commentary, which was also shared on the WeChat account of the China Iron & Steel Association. “Looking back at the market situation in recent years, the above scenario seems to be constantly repeating itself.”

Futures in Singapore on Thursday rose 0.9% to $101.80 a ton, heading for their highest close since Aug. 6. Rebar and hot-rolled coil futures in Shanghai also increased.

CHART: Peru’s phat copper pipeline

Frik Els | August 28, 2024 | 2:00 pm Battery Metals Markets Latin America Copper

Tía María copper project in Peru’s Arequipa region. (Image courtesy of Southern Copper.)

In the outlook accompanying its annual results released this week, BHP (ASX: BHP) said longer term copper demand from the green energy transition could be such that shortages could become structural, creating an environment for a “fly-up pricing regime” in the latter part of the decade.


Some analysts put the copper need from global investment in electric grids, renewable energy and electric vehicles at as much as 12 million tonnes per year by the end of decade – double current levels. The scale up in supply is startling considering total global primary copper production in 2023 was estimated at 22 million tonnes.

Where that extra six million tonnes will come from is the subject of much debate, but it won’t happen without investment in Peruvian copper.

“Tia Maria, despite being one of the smaller projects in the pipeline, has become emblematic of the challenges posed by social resistance, with construction stopped midway in 2019.”

Peru was until last year the world’s second largest copper miner before it was overtaken by Congo (thanks in no small part to the ramp up to 600kt per year at Ivanhoe Mines’ Kamoa-Kakula).

Peru has been struggling to maintain output amid community protests, political turmoil and an unpredictable regulatory regime.

A new report by the copper service of Benchmark Mineral Intelligence cites an interview with energy and mining minister Romulo Mucho last week as a sign Peru’s copper industry is coming back on track.

Mucho, who took office in February, has been working hard to lure investors back to Peru and pointed to the Tia Maria project, which was revived by owners Southern Copper in June.

Mucho said construction of Tia Maria will signal to others it’s safe to recommit to mining in the country, including to backers of La Granja, which after Kamoa-Kakula would be the largest copper project to come on line in decades.

Peru’s copper production, which reached 2.75 million tonnes in 2023, is expected to stagnate during 2024 for the first time since 2020, according to Benchmark:

“Despite these challenges, Peru’s copper potential remains substantial, with 2.6Mtpa of potential capacity in advanced projects. However, social opposition continues to pose a significant barrier. Projects like FQM’s 200ktpa Haquira have struggled with noticeable community resistance for over a decade, impeding growth.

“On the other hand, Peru’s mining climate is gradually becoming more favourable, as evidenced by the recent approval of the 120ktpa Tia Maria project, signalling a shift towards a more pro-mining stance by the government.

“Tia Maria, despite being one of the smaller projects in the pipeline, has become emblematic of the challenges posed by social resistance, with construction stopped midway in 2019. Completion of this project can send a strong signal to other miners with projects in the country that Peru is again open for business.”

Ghana to launch ‘monster mines’ to boost gold production

Reuters | August 29, 2024 | 9:25 am News Africa Gold

Proposed plant at the Namdini gold project in Ghana. (Image courtesy of Cardinal Resources.)

Africa’s top gold producer Ghana will commission its first large-scale greenfield mine in more than a decade in November, with expected annual production of more than 350,000 ounces, the head of its mining sector regulator told Reuters.


The Cardinal Namdini mine is owned by Cardinal Resources, a unit of Shandong Gold, which received a licence for the facility in 2020.

Ghana, the world’s number two cocoa producer, has seen gold exploration slump over the past decade, limiting new projects and lowering output from big miners.

Martin Ayisi, CEO of the Minerals Commission, said three other new mines, including a lithium project, will come onstream by 2026 to boost the West Africa nation’s minerals production and quicken a recovery from its worst economic crisis in a generation.

Ghana last commissioned a large-scale greenfield mine in 2013 when miner Newmont launched its Akyem site in southeastern Ghana.

Since then, “exploration took a nosedive”, Ayisi said in an interview on Monday, but “we will now have commissioning galore”.

“First is Cardinal Namdini, which is a monster mine and it will produce an average of 358,000 ounces per year. Mid-year 2025, Newmont will commission another monster mine – Ahafo North.”

He said the two mines would add at least 600,000 ounces of gold to Ghana’s annual output while bolstering economic growth and creating hundreds of jobs.

Ghana mined 4.03 million ounces of gold in 2023, driven largely by increased output from small-scale and artisanal miners.

Ayisi said another two new mines – a gold mine by Azumah Resources in northwestern Ghana along the border with Burkina Faso, and the country’s first lithium project, owned by Atlantic Lithium – will start production in 2026.

Miners welcome Ghana’s stable fiscal regime, but say excessive costs and bureaucracy are a deterrent for investment.

Ayisi said the Minerals Commission was working with the government to lower the exploration tax.

“Ivory Coast is number one when it comes to exploration spend because they have made it easier. We are number four, but we can be number one,” he said.

Gold production hit 2.5 million ounces by July this year, of which 42% came from small-scale and artisanal miners as surging global gold prices boosted the sector.

(By Maxwell Akalaare Adombila; Editing by Alessandra Prentice and Jan Harvey)

Midnight Sun shares plunge on Zambian exploration licence setback

Staff Writer | August 29, 2024 | 

Drill core at Midnight Sun Mining’s Solwezi copper project in Zambia. Credit: Midnight Sun Mining

Midnight Sun Mining (TSXV: MMA) shares plunged on Thursday after it reported the Zambian government rejected a request to renew the company’s exploration licence for the Kazhiba target at its flagship Solwezi copper project.


The government, which on Thursday said it was forming a new company to control 30% of all the country’s mining projects, didn’t give a reason for the Kazhiba licence refusal, Midnight Sun said. The rights were instead given to another company, the Canadian junior added. It has suspended work on Kazhiba, but said it may appeal the government’s decision.

“While we are disappointed in the current situation, we do believe it will be rectified,” CEO Al Fabbro said in a release. “We are taking all possible steps to expedite a swift resolution so that we can resume our exploration at Kazhiba.”

Shares in Midnight Sun Mining fell 11% on Thursday in Toronto to close at C$0.355 apiece, valuing the company at C$58.7 million ($43.5 million).

Kazhiba is one of three licensed target areas on the company’s 506-sq.-km property that have had significant copper discoveries to date. It is underlain by a previously undiscovered basement dome similar to those at the Kansanshi mine held by First Quantum Minerals (TSX: FM) and Barrick Gold‘s (TSX: ABX; NYSE: GOLD) Lumwana mine, Midnight Sun said.

High-grade target

The Kazhiba project features the high-grade 22 zone, located 10 km from the western mine gate of First Quantum’s Kansanshi mine complex. This zone was discovered by follow-up shallow drilling in 2012 over a subtle copper anomaly with thick overburden, Midnight Sun said. One discovery hole intersected 11.3 metres of 5.71% copper near surface.

Midnight Sun had planned to further explore the target this year to define its copper oxide resources, as well as potential feed sources for the nearby Kansanshi mine under a cooperative exploration plan with First Quantum.

For this program, the company said it had submitted an application to renew the Kazhiba licence. It was due this year for a final three-year extension allowed under Zambian mining law.

No formal notice

Billionaire-backed KoBold, Midnight Sun team up for Zambia copper discovery

However, when Zambia’s mining licencing committee rejected the application in June, it didn’t deliver a formal notice to the company, and instead only published the decision on its website, Midnight Sun said, adding that it was unclear what company was instead awarded the exploration rights.

Meanwhile, Midnight Sun said its other two licences are unaffected by the government’s move. One covers the Dumbwa target, which is under an earn-in agreement with KoBold Metals, the high-profile startup backed by billionaires Bill Gates and Jeff Bezos. The other is the Kansanshi-style Mitu target, part of the cooperative exploration plan with First Quantum.

Exploration is to move forward as planned at Mitu, which represents a bigger target than Kazhiba and also hosts near-surface oxide copper. Previously, drilling at Mitu returned 11.6 metres at 3.44% copper.

US mineral projects close down government loans in fear of Trump

Reuters | August 29, 2024 |

Battery recycling plant in Rochester, New York. (Image courtesy of Li-Cycle.)

US miners and battery recyclers are rushing to close government loans worth billions of dollars before January out of concern that former President Donald Trump would, if reelected, block funding needed to boost American output of critical minerals for the energy transition.


Tumbling prices this year for lithium, nickel and other minerals, as well as lower-than-expected EV sales, have spooked private financiers and put the traditionally conservative mining industry in the unusual position of needing Washington’s support to grow and counter what the West sees as China’s market manipulations.

Under President Joe Biden, the US Department of Energy’s Loan Programs Office (LPO) has awarded nearly $25 billion in conditional loans to 21 companies, including Li-Cycle, ioneer, Lithium Americas, Redwood Materials and others planning to build facilities that recycle batteries or process lithium and other minerals for use in electric vehicles. Such conditional loans still need final approval, which takes time.

Solar companies, including South Korea’s Qcells, and hydrogen firms, including Plug Power, have also received conditional loans, yet their plans rely in part on domestic supply of critical minerals, thus making the funding for mines crucial for the US energy transition.

The average LPO loan is for $1 billion and each must be reviewed by the office and others across government – including engineers, financial experts and even Energy Secretary Jennifer Granholm – before funds are dispersed.

Given Trump’s pledge to “end the electric vehicle mandate” and plans laid out by former Trump administration officials in the Project 2025 document to shutter the LPO, mining companies and others are rushing to close the loans before Biden leaves office in five months. Some are likely to fall short given the short timeframe, according to interviews with more than two dozen industry executives, consultants, investors, analysts and policymakers.

Without those financial lifelines, all of the sources say, many domestic critical minerals projects could be frozen in the planning stage, a step that could cripple the Western EV supply chain as Beijing-linked rivals boost market share by flooding global markets with cheap supplies of metals.

One executive with a loan pending before the LPO said Trump was “a wild card,” so the company was keen to get its loan finalized before a new president takes office in January. The executive was one of five interviewed for this article who, along with other experts in the field, declined to be identified so as not to offend Trump, a Republican, or Vice President Kamala Harris, his Democratic rival in the Nov. 5 election.

Trump has tried to distance himself from Project 2025, although much of its energy-related portions were written by aides from his first term.

LPO staff members have told applicants they will be unable to finalize many outstanding loans before January given the need to closely scrutinize each project’s credit worthiness and other factors, with most loans by necessity falling to the next president to address, three sources with direct knowledge of the conversations said.

The Harris and Trump campaigns did not respond to requests for comment.

The US Department of Energy, which controls the LPO, said the loan program has “provided a bridge to bankability for American entrepreneurs and innovators for almost 20 years” and holds “responsible stewardship of taxpayer money” as a key priority.

“Federal programs like ours regularly continue across administration changes,” said an Energy Department spokesperson.

Harris, who cast the tie-breaking vote for the Inflation Reduction Act in 2022, is expected to continue many of the climate policies implemented by Biden, although her aides told Reuters she is being strategically ambiguous with energy proposals.

The LPO employs roughly 400 people, up from 90 when Biden and Harris took office in January 2021.

Trump issued only one LPO loan during his first term by lending to a Georgia nuclear project that had previously received loans under then President Barack Obama. The LPO was sidelined during the rest of Trump’s term, although his administration did update lending policies a month before leaving office to invite critical minerals projects to apply.

Much of the uncertainty with a Trump second term, according to the sources, centers on how he would implement funding portions of the IRA, which boosted LPO funding yet was opposed by Trump. While Trump couldn’t unilaterally close the LPO as it is congressionally funded, he could slow-walk the loan underwriting process to such a degree that applicants walk away.

Plug Power, which is building multiple US hydrogen plants, said it is working closely with the Energy Department to finalize its $1.66 billion loan. “Given the resilience of (Department of Energy) programs through previous administration changes, we remain confident that subsequent administrations will continue to support projects that have received prior conditional approval,” Andy Marsh, Plug Power’s CEO, told Reuters.
Mining projects

The LPO, which gave Tesla a $465 million loan in 2010 to stave off bankruptcy, has been meticulous in its loan review process under Biden, with more than two-thirds of applicants requiring help to navigate the complex credit review process that slows down the loan approval timeline, LPO chief Jigar Shah, told Reuters last year.

For US mining projects, any delay in funding could imperil plans to supply cathode and battery facilities, many of which are also in line for LPO funding.

In Nevada, ioneer is pushing to close a $700 million LPO loan for its Rhyolite Ridge lithium project, which is estimated to eclipse $1 billion in cost. And General Motors-backed Lithium Americas has begun work on its nearly $3 billion Thacker Pass lithium project, which Trump approved five days before leaving office. The bulk of the project’s funding will come from a $2.26 billion LPO loan that the company expects to close by December.

“We’re pleased that our project was supported by the Trump and Biden administrations,” said a spokesperson for Lithium Americas. “They both have expressed the importance of Thacker Pass in securing a domestic supply of critical minerals.”

Australia-based ioneer did not respond to requests for comment.

Recycling startups Li-Cycle and Redwood are also rushing to close LPO loans. Redwood was conditionally approved for a $2 billion loan that it expected to close last year, but the company is still waiting for funding.

Li-Cycle said it continues “to work closely with the US Department of Energy on key technical, financial and legal workstreams to advance towards definitive financing documentation for a loan.”

Representatives for Redwood and Qcells did not respond to requests for comment.

Another executive with a loan pending before the LPO said they believe Trump understands that EVs will grow in popularity, a stance echoed by some Republicans.

Yet whether Trump would see the value in using US industrial policy to support miners and others in a potential second term – or whether he will hew more toward Project 2025’s aims – is fueling anxiety among executives looking now to make decisions that will affect their companies for years.

A third executive with a pending loan said it was not clear whether Trump’s statements on the subject were “rhetoric or actual policy.”

(By Ernest Scheyder, Gram Slattery and Trevor Hunnicutt; Editing by Veronica Brown and Claudia Parsons)

ARTISANAL MINING

Toxic, deadly, cheap: Life for women gold miners in the Philippines

Reuters | August 29, 2024 | 

Families in small-scale gold mines in the Philippines. 

Credit: ILO Asia-Pacific | Flickr

It’s a man’s world mining gold in the Philippines – but it’s the women who come off worst.


Be it cooking toxic pans of mercury, scouring mud pools for cheap slivers of hope or sluicing the boggy soil – women do the hardest jobs and get paid the least.

One in three of the illegal mining workforce is female – and women are 90 times more at risk of dying on the job than men.

“There are a lot of women in the mines, but they are invisible,” Meggy Katigbak, an expert on small-scale gold mining, told the Thomson Reuters Foundation.

The work is illegal, makeshift – and doesn’t even pay well.

But they’ve been mining this way for centuries in Paracale, a colonial, coastal city whose name means ‘canal digger’ after gold-hungry colonial powers swooped in to make their fortunes.

They are still scouring – and dreaming big – today.

“Life here is hard, but my children give me strength to do this. They’re my life,” Christy Ortiz told the Thomson Reuters Foundation.

Like any other day, 44-year-old Ortiz rose at dawn, waking first to cook for her seven children, before setting out to hunt for gold in a homemade mine she had dug from rice paddies and filled with muddy water.

Ortiz and her husband practice compressor mining – the world’s most dangerous gold extraction method and one that is only found in her little corner of the Philippines.

Manila banned it in 2012 for its grave safety risks and health hazards – a matter of no care to the Ortiz family.

As Ortiz looked on, her husband dove 10 feet (3 m) under, breathing through a tube he had connected to a compressor, which pipes air underwater and is her family’s prized possession.

Ortiz paid 29,000 pesos ($515.92) for the machine, using money she had amassed through years of scrimping, carefully saving her state welfare grants: money only given to the country’s poorest.

While her husband waded underground for hours, filling buckets with dense soil, Ortiz performed all the above-ground rituals to extract whatever slivers of gold she could find.

With no protective equipment, she worked in the same white shirt and skirt that she wore at home.

There is little separating her work from home life.

“Sometimes I forget to eat breakfast, because I need to go straight to the mine after sending my kids to school,” said Ortiz.

Her feet soaked in muddy water, she mashed the soil and ran gloop through a sluice box made of wood and banana leaves, hoping the water might tease out even a sliver of gold.

Next Ortiz extracted the nuggets from a clag of soil and stones, using a traditional wooden tool, then cooked up the gold with mercury, a toxic metal used to separate gold from ore.

Her takings – one tiny piece of amber metal worth less than 200 pesos ($3.56) enough to get them through that day.

Luckier than yesterday, she said, when no gold came.

Ortiz said earnings ranged from zero to 1,000 pesos a day, so on lean days, Ortiz said she had to pull a double shift and go selling charcoal to the neighbours to feed her big family.

“I didn’t want to do this forever — I wanted to go back to my hometown,” said Ortiz, who lives more than 1,000 km from her birthplace. “But I didn’t want the people there to know that I’ve been struggling since I came here.”
Her health, her baby’s health

Some 15 million women work in the artisanal and small-scale gold mining (ASGM) sector globally, and an estimated 18,000 to 20,000 Filipino women and children take part in ASGM-related work.

Figures may be far higher in the absence of any official count, industry experts say, but all agree the work affects women’s health and earnings disproportionately.

Gender discrimination and disregard for health, safety and social protection limit the rights and economic opportunities of women miners, according to a 2023 report by the World Bank.

Women are often barred from the top jobs and do not get paid as much as men for the same work, according to the Bank, which analysed mining laws in 21 countries.

Deep-seated cultural bias can also get in the way of wider sectoral reform.

Filipino women struggle to access capital, even as their exposure to hazards has increased, the report said.

In Paracale, many families mix backyard digging with domestic life, forcing women to balance household chores and caring duties with risky gold panning and mercury mixing.

A field survey by the International Labour Organization (ILO) revealed that almost 73 percent of female Philippine respondents had handled mercury, often linked with pregnancy risks and birth abnormalities, such as cerebral palsy.

Janice Galero, who used to sluice, pan, and cook gold in Paracale, said high levels of mercury were still found in her blood seven years after she stopped mining.

Official tests carried out in 2022 to gauge the risks of mining showed mercury in a high number of women’s blood.

But a representative from planetGOLD, a United Nations-affiliated programme working to eliminate mercury from the supply chain in gold, said both the national Department of Health and the local government of Paracale had “agreed not to make the results public to avoid panic in the community”.

“The DOH made recommendations for the offices concerned and the local government…developed an action plan to address the issue,” said planetGOLD communications officer Dawn Po Quimque.

The DOH did not respond to requests for comments.

ASGM is the largest user and emitter of mercury in the world, according to the UN Environment Programme.

Mercury can damage the nervous system, kidneys, liver and immune system, but is widely used as it is cheap and effective.

Now a board member of a local mining association, Galero said she wants to raise awareness of the health risks of mercury as well as bring an end to all illegal mining in her town – an uphill task given so many locals depend on gold to survive.
Folklore and tradition

In the mountain town of Sagada in the Cordillera region, the country’s least populous area, women are banned from the mine tunnels during their menstrual period to avoid “bad luck”.

Yet women elders are also expected to lead Sagada rituals for a bountiful “harvest” in the mines, in a nod to women’s traditional, hallowed role in agriculture.

Eliza, a respected elder and among the first women allowed to work in the sector in the 1980s, said she was still barred from the tunnels and could only get work sluicing, shovelling rocks to hunt for missed nuggets or cooking meals for miners.

Men focus on mine work, whereas women were “jack of all trades” scrambling for odd jobs to feed the family, she said.

So Eliza works as a tour guide, raises pigs and sells homemade rice cake and sweet potato on weekends.

Gold extraction pays poorly for women such as Leny Lieo, who was hired in February to sluice gold, a task commonly reserved for Sagada women.

Lieo, 49, said she works an eight-hour day at the Fidelisan village mine and gets paid 300 pesos, lower than the daily minimum wage in her province.

She had no choice; rice farming no longer fed her family.

“At least here, I can earn money to buy makeup or lipstick,” she joked. “Money is important to me so my family can eat.”

Jobs like hers come without any health or social benefits – she is considered an add-on.

“I am not a miner because I’m a woman. Only men are considered miners,” said Lieo, picking up her second basin of soil for sluicing. “If you’re a regular worker, you have benefits. And your salary is higher.”

Yet some change is finally afoot in slow-to-budge mining, with activists seeing room for female leadership in the sector.

“We see female politicians, women who head local state offices… but we need more. We really need more push especially in places where women are being discriminated,” said Sagada municipal gender officer Gloria Pilamon-Langbayan.
Mining reforms

The World Bank is calling for new legislation to recognise women’s role in mining and is urging politicians to address the hazards that women miners in particular face.

Reform, though, is hard in a sector that is largely illegal and unregulated, despite producing 80% of the country’s annual gold reserves and supporting 2 million Filipinos.

In the Philippines, the industry is covered by the “People’s Small-Scale Mining Act of 1991”, which limits small-scale mining to manual labour and prohibits the use of heavy equipment.

New approach aims to detoxify artisanal gold mining

Many small-scale mines were outlawed in 2012 when the government mandated that locals instead set up mining cooperatives or certified associations.

About 100 mines have since won approval but the application process is tedious and resource-intensive, with fees as high as 2 million pesos.

Backyard digging, compressor mining and other informal gold mining operations remain rampant in Paracale, overtaking farming as the main source of income for locals.

More than half the town’s population of 60,000 is involved in mine work yet it only has one certified people’s mine.

“People would ask: ‘Why is Paracale not wealthy when it’s rich in gold?'” the town’s vice mayor Bernadette Asutilla told Context in an interview.

The reality on the ground had moved on from the laws, Asutilla said, since the old mines ran dry, forcing small-scale miners to dig deeper and work longer to earn a living.

Asutilla said this would require modern equipment or explosives – both prohibited by law.

“Mining has become a gamble in Paracale,” she said.

“With the resurgence of small-scale mining, we see that women are becoming more involved with mine work and occupying leadership roles,” the vice mayor said.

Back in Paracale, Shirley Suzara is a case in point.

Often buried in paperwork, the 51-year-old works from her Paracale home to improve access to capital and markets, checking that local operations are legal and promoting equal pay for men and women under her watch.

“We do not dive underground, but women are important in any aspect of [gold production],” said Suzara.

Katigbak, the sectoral expert who is working with mining communities on gender reforms, said it was baby steps – so far.

“Although women still do not have that much hand in decision making… we see that they are now finding their voice. But it takes a long time,” said Katigbak.

“We still have a long way to go.”

($1 = 56.2100 Philippine pesos)

(By Mariejo Ramos; Editing by Lyndsay Griffiths)